Mark Carney’s BoC Record Under Fire

Mr. Carney’s U.K. honeymoon ended months ago, but the economic wolves are now circling his record in Canada. Once a hero, now he is accused of having driven factories and jobs out of Canada in favour of promoting condo development. The charge, from CIBC World Markets economist Avery Shenfeld, is a bit of a shock. “In effect,” he said, “monetary and exchange-rate policy traded off more condos for fewer factories.”

That’s some charge. As Mr. Shenfeld sees it, the Bank of Canada under Mr. Carney kept interest rates low between 2010 and 2013. During that period the Canadian dollar stayed at parity with the U.S. dollar. The result, said Mr. Shenfeld in a recent commentary, was to stimulate housing development through low interest rates but put a damper on Canadian exports by maintaining a “seriously overvalued” dollar.

Instead of letting the Canadian dollar float, a keystone of Canadian economic policy, Mr. Shenfeld implies the Bank of Canada should have intervened to drive down the dollar. By failing to push the value of the dollar lower, Mr. Carney created an environment in which Canadian manufacturers were discouraged from making long-term investments in plants and were even shuttering them for good.

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Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.

MarketPulse is a forex, commodities, and global indices analysis, and forex news site providing timely and accurate information on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.

Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.

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